Iraq To Comply With OPEC Cuts Despite Lifting Oil Export Capacity

Despite efforts to ramp up its oil export capacity, OPEC’s second-largest producer, Iraq, will comply with the production cuts pact, Iraq’s Oil Minister Jabbar al-Luiebi said at a conference in London on Monday.

In the OPEC/non-OPEC production restriction deal, Iraq agreed to cut 210,000 bpd off its October 2016 level and cap production at 4.351 million bpd.

According to OPEC’s secondary-sources figures—the ones the cartel uses to measure compliance—Iraq has never actually complied 100 percent with its commitment. Iraq’s December 2017 oil production was 4.405 million bpd, up from 4.397 million bpd in November and from 4.388 million bpd in October. The Q4 2017 average production was 4.397 million bpd, slightly above its ceiling, while production in Q2 and Q3 was 4.455 million bpd and 4.482 million bpd, respectively. For the whole of 2017, Iraq’s average production was 4.445 million bpd, according to OPEC’s secondary sources.

In the last quarter of 2017, Iraq’s compliance was boosted by the decreased oil production and exports from the north, after federal government forces seized the oil fields around Kirkuk, which had been under Kurdish control since 2014. The military maneuver knocked some 350,000 bpd of crude oil production offline and led to oil prices spiking on concerns of unstable supply from the region. Related: Are Oilfield Services A Buy?

To compensate for lower exports in the north, Iraq has boosted its exports from the south, and has increased the export capacity of its southern ports to 4.6 million bpd.

Iraq’s total oil export capacity is close to 5 million bpd, al-Luiebi told a Chatham House conference in London today, but noted that “Iraq has made it clear at every time and every event that Iraq will comply with OPEC declarations in good spirit, genuine spirit.”

Baghdad also hopes to more than double its oil production from the Kirkuk fields in the north with the deal that it has recently signed with BP, the oil minister said.

The oil market is improving and is bearing “fruits”, including higher oil prices, the Financial Times quoted al-Luiebi as telling the conference.